| Best time to diversify and purchase bond mutual funds? |
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jbcentral
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| Best time to diversify and purchase bond mutual funds? |
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Hello,
I have questions relative to the "best time" to start diversifying my retirement portfolio into bonds funds.
My wife and I are each 48 yrs of age and we currently have 100% of our retirement savings (~ $680K) invested in stock mutual funds within our 401Ks, IRAs, etc... While I realize my equity position is considered aggressive - if not foolish - I do believe I am still very prudent with my selection of domestic/international stocks and I certainly do not have any issues sleeping at night.
That being said, given that we still have 20 years or so prior to potential retirement....
With interest rates at rock bottom, is now a good time to diversify our portfolio and invest in bond mutual funds, such as Vanguard's Total Bond Market Index Fund? If not, why?
If so, how should I go about the investment process? In other words, should I transfer one lump sum of approximately $150K - $200K from our stock funds or dollar-cost-average the amount? And if I should dollar-cost-average, what dollar amount in what frequency (i.e. monthly, quarterly, etc...)
Thank you,
JBCentral
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Fri Feb 03, 2012 11:24 am |
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oldguy
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quote:
With interest rates at rock bottom, is now a good time to diversify our portfolio and invest in bond mutual funds, such as Vanguard's Total Bond Market Index Fund?
IMO, there is no hurry at your ages. A couple reasons - (1) you are young enough to weather another negative cyucle if that is in store (and I doubt that it is). (2) Market timing can't be done - but as you say, bonds are probably at or near the top, bad time to buy - and the stocks are probably due for better things as the antibusiness pendulum self-corrects over the next few years.
In a couple of years, you could start transfering 5%/yr to bonds, that gets your allocation to ~50/50 at age 60. I like the Vanguard Total Bond Fund and their GNMA Fund (VFIIX), they own short duration bonds, about 3 or 4 years, so rate swings don't impact them so much as with longterm bonds.
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Fri Feb 03, 2012 3:49 pm |
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coaster
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| Re: Best time to diversify and purchase bond mutual funds? |
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quote:
Originally posted by jbcentral
With interest rates at rock bottom, is now a good time to diversify our portfolio and invest in bond mutual funds, such as Vanguard's Total Bond Market Index Fund? If not, why?
Bond prices are inversely correlated to their yield. Thus if you invest in bonds now, what's going to happen to the market value of your investment when rates go up?
~Tim~
Eye Candy : Why Whimsy
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Fri Feb 03, 2012 6:42 pm |
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jbcentral
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Thank you to both of you, as I appreciate your replies.
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Sat Feb 04, 2012 1:45 am |
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